Superannuation
X

We'd love to help you build a successful business and grow your personal wealth. Get in touch to book a free consultation.

    On 1 July 2019 your insurance cover may be changing!

    In February this year, the Government passed legislation which prevents trustees of APRA-regulated funds from providing insurance to members with inactive superannuation accounts, unless a member has directed otherwise.

    It is a common practice for many individuals with an SMSF to also have a secondary APRA-regulated fund which provides them with insurance.

    This may be done for two key reasons:

    • To access insurance policies provided through large superannuation funds which are often cheaper.
    • To keep legacy insurance policies which may offer better benefits or lower premiums than new policies, especially for older members.

    In these circumstances, it is most likely that people holding these polices through an APRA-regulated super fund will consider that their SMSF is their primary superannuation account and therefore receives all their contributions and roll-overs.

    It is usually the case that people will leave enough money in their APRA-regulated fund account to cover the cost of insurance premiums. Where required they may rollover funds from their SMSF to their APRA-regulated fund or make a contribution to pay for insurance premiums and administration fees to keep their insurance policy.

    Under the new legislation, you now may lose your insurance cover if your APRA-regulated fund is considered inactive because it has not received a contribution or a rollover for a continuous period of 16 months.

    At 1 July 2019, if your APRA-regulated fund is considered inactive for 16 months your insurance will be terminated.

    APRA-regulated funds had until 1 April to identify members who have been continuously inactive for six months or more and now have until 1 May to inform those inactive members that their insurance will soon be switched off unless they elect to retain it.

    We are concerned that insurance will be unknowingly closed for these accounts because members have not checked their correspondence, especially for those who rely on this insurance held separately.

    This could have a devastating impact on policy holders or their beneficiaries if their insurance cover was unknowingly terminated. Furthermore, it may be extremely difficulty or costly to try and access insurance at a later stage of life.

    So what can you do?

    It is important that if you wish to maintain your insurance cover that you take necessary steps as soon as possible. This includes either:

    • Providing a direction to your APRA-regulated fund that you wish to ‘opt-in’ for your insurance cover to be maintained.
    • Making a contribution or rollover to your ‘inactive’ APRA-regulated fund so that the period for which your fund starts to be inactive is reset. However, it stressed that you also ‘opt-in’.

    How can we help?

    If you are concerned you are going to be affected by these changes or need assistance with your insurance, please feel free to give Cayle Petritsch or Martin van der Saag a call. Read more Financial Industry articles.

    The Coalition Government has been re-elected in the 2019 Federal Election, with a small majority of seats in the House of Representatives, after taking a policy of stability for superannuation to the election.

    After the introduction of the significant legislative changes which came into effect on 1 July 2017, you may be relieved to hear that for at least the next three years we hope to have sustained stability for super. You may also be relieved to hear the proposal to ban refunds for excess franking credits and other superannuation changes will not be implemented. This means that you can focus on managing your financial needs rather than worrying about changing rules.

    Before the election, the Coalition did announce tweaks to the superannuation system that we anticipate will be implemented by the Government including:

    • Guaranteeing no new taxes on superannuation.
    • Greater flexibility for retirement contributions.
      • From 1 July 2020, Australians aged 65 and 66 will now be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the work test. Previously, this was only available to individuals below 65.
      • This also includes extending access to the bring-forward arrangements to individuals aged 65 and 66 which allows individuals to make three years’ worth of non-concessional contributions to their super in a single year.
      • Increasing the age limit for individuals to receive spousal contributions from 69 to 74.
    • Reducing red tape for superannuation funds — exempt current pension income (ECPI) changes.
      • The Government will streamline administrative requirements for the calculation of ECPI.
    • Reducing costs for the super industry by including superannuation release authorities in electronic SuperStream Rollovers.
      • The Government will provide $19.3 million over three years beginning in 2020-21 to the Australian Taxation Office (ATO) to send electronic requests to superannuation funds for the release of money required under a number of superannuation arrangements.
    • Retaining limited recourse borrowing arrangements (LRBAs).
    • Increasing the maximum number of SMSF members from four to six.

    Next steps

    With the end of financial year now fast approaching and certainty with the Government and its super policies it is the time to ensure everything is in place for your SMSF before 30 June. I have compiled some strategies that you may need to consider and ensure the plans you have in place are the best for you and your SMSF.

    Contribution caps

    Before 30 June you should:

    • Review if you have any income available to contribute to your fund; and
    • Review your total contributions to ensure they are below the caps.

    Non-concessional (after tax) contributions are limited to $100,000 for the 2019 financial year and concessional (before tax) contributions are limited to $25,000.

    Members under 65 years of age have the option of contributing up to $300,000 over a three-period depending on their total super balance.  Transitional arrangements also apply to individuals who brought forward their non-concessional contribution caps in the 2016-17 financial year.

    Anyone making large superannuation contributions should exercise extreme care to avoid excess contributions.  Making sure you do not exceed the contribution caps will save you both money and time of dealing with excess contributions.

    Contributions are included in a financial year if they are received in your fund’s bank account by 30 June. With 30 June falling on a Sunday this year, it would be prudent to make your contributions by Wednesday 26 June to ensure they are received by your fund prior to the end of the financial year.

    Drawing superannuation pensions

    If you are in pension phase, you need to ensure the minimum pension has been paid to you for this financial year. Where these requirements have not been met your fund will be subject to 15% tax on your pension investments, rather than being tax free.

    Personal superannuation contributions

    Most people regardless of their employment arrangement, can claim a deduction for personal super contributions they make to their fund until they turn 75.

    Individuals who are aged between 65 and 75 will need to meet the work test to be eligible to claim the deduction.

    If you wish to claim a tax deduction for personal contributions, you must complete and lodge a notice of intent with your fund before June 30 and have this notice acknowledged (in writing) by your fund.  Any contribution also needs to be received by your fund before June 30.

    Co-contributions

    If you meet the relevant work tests and earn less than $52,697, it is also worth considering if you can take advantage of the Government super co-contribution.

    SMSF fund expenses

    For members in the accumulation phase, it is important that any expenses are actually incurred or paid before 30 June to be deductible in the current financial year.

    Rebalancing accounts between spouses

    The end of financial year is also the perfect opportunity to rebalance pension accounts between spouses, to ensure that super balances are as even as possible and the $1.6 million transfer balance cap is maximised for each member.

    Transfer Balance Account Reporting (TBAR)

    Funds that were paying a pension during 2018-19 will need to complete and lodge a Transfer Balance Account report with the ATO. The date of when you have to report depends on the size of your superannuation balance.

    How can we help?

    If you have any questions or would like further in ensuring you and your fund are well prepared for the end of the financial year please call Cayle Petritsch or Martin van der Saag on 02 9984 7774. Read more Superannuation articles.

    The federal election is this weekend, 18th May 2019 , both major parties have outlined their superannuation and tax policies. With the federal election only days away many of our clients have been asking what the major political parties’ policies are that may impact their SMSF, individual taxation circumstances or personal investments.

    If you would like more information on a particular policy announcement, please do not hesitate to contact our office .

    Liberal-National Coalition

    Superannuation

    • Australians aged 65 and 66 will be able to make voluntary superannuation contributions without needing to work a minimum amount. Previously, this was only available to individuals below 65.
    • Extending access to the bring-forward arrangements (the ability to make three years of post-tax contributions in a single year) to individuals aged 65 and 66.
    • Increasing the age limit for individuals to receive spouse contributions from 69 to 74.
    • Reducing red-tape for how SMSFs claim tax deductions for earnings on assets supporting superannuation pensions.
    • Delaying the implementation of SuperStream (electronic rollovers for SMSFs and superannuation funds) until March 2021 to allow for greater usability.

    Taxation

    • From 2018-19 taxpayers earning between $48,000 and $90,000 will receive $1,080 as a low and middle income tax offset. Individuals earning below $37,000 will receive a base amount of $255 with the offset increasing at a rate of 7.5 cents per dollar for those earning $37,000-$48,000 to a maximum offset of $1,080.
    • Stage 1 tax cuts: From July 1 2018, increasing the top threshold of the 32.5 per cent tax bracket from $87,000 to $90,000.
    • Stage 2 tax cuts: From 1 July 2022, increasing the top threshold of the 19 per cent personal income tax bracket from $41,000, to $45,000.
    • Stage 3 tax cuts: From 1 July 2024, reducing the 32.5 per cent marginal tax rate to 30 per cent which applies from $120,000 to $200,000. The 37 per cent tax bracket will be abolished.

    Australian Labor Party

    Superannuation

    • Disallowing refunds of excess franking credits from 1 July 2019 – this would mean SMSF members in pension phase no longer receive refunds for the franking credits they receive for their Australian share investments.
    • Banning new limited recourse borrowing arrangements.
    • Reducing the post-tax contributions cap to $75,000 per year down from $100,000.
    • Ending the ability to make catch-up concessional contributions for unused cap amounts in the previous five years.
    • Ending the ability for individuals to make personal superannuation tax deductible contributions unless less than 10 per cent of their income is from salaries.
    • Lowering the higher income 30per cent super contribution tax threshold from $250,000 to $200,000.

    Taxation

    • Labor supports the stage 1 tax cuts and will match the $1,080 low and middle income tax offset. From 1 July 2018, individuals earning below $37,000, will get a $350 a year tax offset, with this amount increasing for those earning between $37,000- $48,000 to the maximum $1,080 offset.
    • Introduce a 30 per cent tax rate for discretionary trust distributions to people over the age of 18.
    • Will limit negative gearing to newly built housing from January 1 2020. (Existing investments are grandfathered under the current law)
    • Reduce the capital gains tax discount for assets that are held longer than 12 months from the current 50 per cent to 25 per cent. (Existing investments are grandfathered under the current law)
    • Limit the deductions for the cost of managing tax affairs to $3,000.

    How can we help?

    If you have any questions or would like further clarification in regard to how the above policies may affect you and your fund, please feel free to give Cayle Petritsch or Martin van der Saag a call on 02 9984 7774. Read more Superannuation articles.

    Dividend imputation

    The Australian Labor Party (ALP) has announced an intention in government to change franking credits from a refundable to a non-refundable tax credit from 1 July 2019.

    A “Pensioner Guarantee” would be included in the franking credit change for individuals in receipt of an Australian Government pension or allowance. Also, self-managed superannuation funds with at least one pensioner or allowance recipient before 28 March 2018 will also be exempt from the changes (ALP website).

    Negative gearing

    Under an ALP government, negative gearing will only be allowed on newly constructed residential properties after 1 January 2020 (ALP website).

    All prior investments would be grandfathered, meaning that income losses on an asset class are able to be offset against other assessable income.

    It has been suggested that any negative income amounts would be allowed to be carried forward and offset against a future capital gain on the asset (Ref: MinterEllison, p 5).

    However, investors with many rental properties may be able to “stagger” the gearing levels across currently held assets in the same class. Specifics relating to how the new policy would work with regards to split loans, redraw or credit facilities are to be determined.

    CGT discount

    From 1 January 2020, the ALP has proposed to halve the capital gains tax discount from 50% to 25%. This change in the discount rate will apply for all assets purchased after 1 January 2020 that are held for longer than 12 months (ALP website).

    The media release goes on to say that all purchases made prior to 1 January 2020 will be fully grandfathered. There has been no announcement regarding any consequences this development may have on employee share scheme acquisitions.

    Limit on deductions for managing tax affairs

    The proposal in its current form is a $3,000 limit per taxpayer per year for managing tax affairs. This may include preparing and lodging tax returns and activity statements, and obtaining tax advice from a recognised tax adviser.

    Other areas which have been seen as controversial in the media relate to tax agent charges in large “one-off” events, such as divorce, inheritance or retirement (Ref: CPA In the Black). Also, there has been no further guidance on whether the deductibility of general interest charge on a tax debt will also be limited to $3,000 per year.

    Discretionary trust distributions tax

    A prior announcement made by the ALP in opposition intends to introduce a 30% standard minimum rate of tax to adult beneficiaries for discretionary trusts. There intends to be no change to the trust taxing rules for non-discretionary trusts, such as testamentary trusts or fixed unit trusts (ALP website).

    Extension of budget repair levy

    Following the 2019 Federal Budget, the ALP confirmed that, in government, they will bring back the temporary budget repair levy of 2%. ALP shadow treasurer stated the levy would remain in place until the budget surplus was 1% of gross domestic product, anticipated to be 2023 (AFR story, 3 April).

    The 2% levy would apply to individuals who are above $180,000 in taxable income.

    Australian Investment Guarantee

    The ALP leader confirmed in the 2019 budget reply speech a commitment to the Australian Investment Guarantee (AIG). The AIG will be an immediate write-off of 20% for any new eligible asset costing more than $20,000.

    Further information on eligible assets would be made available later, but are intended to include machinery, plant and equipment, including upgrades. It is announced that investments in buildings (capital works) would be excluded, as well as motor vehicles.

    Superannuation contributions

    The federal opposition has committed to changing certain rules relating to superannuation contributions (ALP website). These include:

    • providing superannuation guarantee payments of 9.5% for paid parental leave, and
    • phasing out the $450 per month minimum income threshold for superannuation guarantee.

    Catch-up concessional contributions

    Labor has announced their intention to repeal the catch-up concessional contributions, introduced in the 2016/17 income year (2018 ALP National Platform, p 15).

    Under the enacted legislation, individuals with a total superannuation balance of less than $500,000 are able to make additional concessional contributions. Eligibility to make additional contributions apply where an individual has not reached their concessional contributions cap in previous years, with effect from 1 July 2018. Unused amounts will be carried forward on a rolling basis for a period of five consecutive years from 1 July 2018.

    Other announcements

    • Maintaining the company tax rate of 25% for businesses with aggregated turnover under $50m, scheduled to commence in the 2021/22 income year.
    • Managed investment trust tax rate to be reduced from 30% to 15% in a “Build to rent” scheme, commencing 1 January 2020.
    • Removal of thin capitalisation calculations for debt deductions, leaving international entities with only the worldwide gearing ratio test to apply.
    • Reducing non-concessional contributions cap from $100,000 to $75,000.
    • Reducing threshold for Div 293 tax from $250,000 to $200,000.
    • Banning new limited recourse borrowing arrangements in self-managed superannuation funds.
    • Reintroducing recently repealed legislation surrounding deductibility for salary and wage earners to make additional deductible superannuation contributions. In the past, only self-employed individuals could make personal deductible superannuation contributions.

    If you have any questions or concerns about how the Australian Labor Party tax policies may impact on you, please do not hesitate to contact us. Read more Financial Industry articles.

    Norman Ruan
    Accountant
    T: 02 9984 7774
    E: normanr@northadvisory.com.au

    Members of regulated superannuation funds have no restrictions for making voluntary contributions prior to reaching 65 years of age. However, from 1 July 2020 the government has proposed to increase this age limit and allow 65 and 66 year olds to contribute without restrictions.

    This proposal will also extend the ability for members to make bring forward contributions, potentially making more individuals eligible to make 3 years of contributions.

    The proposed changes only relate to voluntary contributions, as employer contributions have different rules relating to individuals over the age of 65. Read more Superannuation articles.

     

    The Federal Treasurer, Mr Josh Frydenberg, handed down the 2019/20 Federal Budget at 7:30 pm (AEDT) on 2 April 2019.

    Mr Frydenberg said the Budget is “back in the black”, announcing a budget surplus of $7.1b, and forecasting a surplus of $11b in 2020/21, $17.8b in 2021/22 and $9.2b in 2022/23. The budget focuses on “restoring the nation’s finances”, further strengthening the economy to create more jobs and to “guarantee the essential services”.

    The government proposes various changes to further lower individual taxes, including increasing the low and middle income tax offset, and lowering the 32.5% rate to 30% in 2024/25. More businesses will have access to immediate deductions for asset purchases, with the expansion of the instant asset write-off to businesses with an annual turnover of less than $50m.

    The tax, superannuation and social security highlights are set out below.

    Income tax

    • The legislated Personal Income Tax Plan will be changed to further lower taxes for individuals, including changes to the low and middle income tax offset (LMITO), the low income tax offset (LITO) and the personal income tax (PIT) rates and thresholds.
    • The instant asset write-off threshold for businesses with an aggregated turnover of less than $10m will be increased to $30,000 for eligible assets that are first used, or installed ready for use, from 7.30 pm (AEDT) on 2 April 2019 to 30 June 2020.
    • Businesses with an aggregated turnover of $10m or more but less than $50m will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from 7.30 pm (AEDT) on 2 April 2019 to 30 June 2020.
    • The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2018/19 income year.
    • Payments to primary producers in the Fassifern Valley, Queensland affected by storm damage in October 2018 will be treated as exempt income.
    • An income tax exemption will be provided for qualifying grants made to primary producers, small businesses and non-profit organisations affected by the North Queensland floods.
    • Six more organisations have been approved as specifically-listed deductible gift recipients.
    • The list of countries whose residents are eligible to access a reduced withholding tax rate of 15% on certain distributions from Australian managed investment trusts (MITs) will be updated.

    Tax integrity and black economy

    • Australian Business Number (ABN) holders will be required to lodge their income tax return and confirm the accuracy of their details on the Australian Business Register annually to retain their ABN status.
    • The start date of amendments to Div 7A will be delayed by 12 months to 1 July 2020.
    • Minor amendments will be made to the hybrid mismatch rules to clarify their operation from 2019.
    • The ATO’s Tax Avoidance Taskforce will extend its operations and expand its activities, including increasing its scrutiny of specialist tax advisors and intermediaries that promote tax avoidance schemes.
    • The ATO will receive funding to increase activities to recover unpaid tax and superannuation liabilities with a focus on large businesses and high wealth individuals.
    • A dedicated sham contracting unit will be established within the Fair Work Ombudsman to address sham contracting behaviour by some employers.

    Superannuation

    • Members of regulated superannuation funds will not have to meet the work test after 1 July 2020 if they are 65 or 66 years of age.
    • The restrictions on claiming the spouse contribution tax offset will be eased from 1 July 2020, giving 70 to 74 year old spouses eligibility.
    • The calculation of exempt current pension income will be simplified for superannuation funds from 1 July 2020, allowing a preferred method of calculation and removal of some actuarial certificates.
    • Transitional tax relief for merging superannuation funds will become permanent from 1 July 2020.
    • SuperStream will be expanded from 31 March 2021 to include electronic ATO requests for release of superannuation funds and SMSF rollovers.
    • An expression of interest process will be undertaken to identify options to support establishment of a Superannuation Consumer Advocate.

    Indirect taxes

    • For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid, up to a maximum of $10,000.
    • Access to refunds of indirect tax, including GST, fuel and alcohol taxes under the Indirect Tax Concession Scheme has been granted or extended.

    Social security

    • There will be a one-off Energy Assistance Payment of $75 for singles and $62.50 for each member of a couple eligible for qualifying payments on 2 Apri 2019 and who are resident in Australia.
    • Single Touch Payroll reports lodged by employers will be shared with social security agencies from 1 July 2020.
    • Family Tax Benefit eligibility will be extended to the families of ABSTUDY (secondary) student recipients who are aged 16 years and over, and are required to live away from home to attend secondary school.
    • From 1 July 2019, net income generated from the forced sale of livestock will be exempted from the Farm Household Allowance payment assessment, when that income is invested into a farm management deposit.
    • The HELP debt incurred for recognised teaching qualifications after teachers have been placed in very remote locations of Australia for four years (or part time equivalent) will be extinguished. Indexation on HELP debts of all teachers while they are placed in very remote locations will no longer accrue from 14 February 2019.

    How can we help?

    If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2018-19 Federal Budget, please feel free to contact Martin van der Saag or Norman Ruan on (02) 9984 7774. Read more Financial Industry articles.

    From July 1 2020, Australians aged 65 and 66 will be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the Work Test.

    Currently, they can only make voluntary contributions if they meet the Work Test, which requires that they work a minimum of 40 hours over a 30 day period.

    This means that Australians aged 65 or 66 years who don’t meet the work test, because they may only work one day a week or volunteer, will now be able to make voluntary contributions to their superannuation.

    This will align the Work Test with the eligibility age for the Age Pension, which is scheduled to reach 67 from 1 July 2023.

    There are around 55,000 Australians aged 65 and 66 who will benefit from this reform in 2020-21.

    In addition, the age limit for spouse contributions will increase from 69 to 74 years. Currently, those aged 70 years and over cannot receive contributions made by another person on their behalf.

    There will also be extended access to the bring-forward arrangements, which currently allow those aged less than 65 years to make three years’ worth of non-concessional contributions, which are capped at $100,000 a year, to their super in a single year. This will now be extended to those aged 65 and 66.

    If you require any further information, please contact Martin van der Saag of this office. Read more Superannuation articles.

    Martin van der Saag
    Partner
    T: 02 9984 7774
    E: martinv@northadvisory.com.au

    Setting up an SMSF can be complicated.  Not getting it right can materially affect your financial situation and retirement plans.

    The first question you need to be sure about is whether an SMSF is the right fit.  Seeking specialised financial advice can help you determine this answer. Some considerations include:

    Low balances

    You must ensure you have an appropriate superannuation balance before considering an SMSF. While a low balance can be a red flag, it is not always a barrier to entry.  However, in many cases, establishing an SMSF with a starting balance of $200,000 or below may not be in your best interests. This is because SMSFs tend to be more cost efficient with larger balances.

    Motivation

    You must also understand your motivation for establishing an SMSF. The most common motivation SMSF trustees indicate is control. Control of an SMSF allows individuals to have a wide range of investment choice, flexibility and engagement with their superannuation. However, superannuation law is complex and you need to ensure your ambitions are allowed by the regulations and will be able to achieved in an SMSF.

    Costs and time

    SMSFs incur a wide range of costs in establishment and the day to day running of the fund. Ensure you are across the estimated establishment, accounting and audit costs that will be incurred by your SMSF. Speak with your advisers so you are across all other incidental costs, which unlike large super funds generally occur with fixed rates rather than as a proportion of your balance.

    SMSFs also require dedicated attention from trustees which will take time out of your daily life to manage. Understanding from the outset your legislated responsibilities and obligations before establishing an SMSF is important.

    Establishment process

    Once you have decided that an SMSF is right for you, you must engage in the establishment process. A specialist SMSF adviser is best person to help you to choose a trustee structure, select a trust deed, complete ATO registration and fund set up.

    Investment Strategy and Insurance

    Upon establishment you must also create an investment strategy which must be regularly reviewed.

    Your investment strategy should be in writing and must consider:

    • Diversification (investing in a range of assets and asset classes).
    • The liquidity of the fund’s assets (how easily they can be converted to cash to meet fund expenses).
    • The fund’s ability to pay benefits (when members retire) and other costs it incurs.
    • The members’ needs and circumstances (for example, their age and retirement needs).
    • Considering whether to hold insurance in your SMSF.

    Property investment

    It is also common for SMSF trustees to be motivated by investing in property when establishing an SMSF. You should be sure that any investment in property, particularly when gearing is involved, is appropriate for your circumstances. Holding properties in an SMSF can also require some complex structures to ensure the law is being followed and specialist advice may be needed before making an investment choice. A lack of diversification, low balances and inappropriate property investments can have a detrimental impact on your retirement savings.

    How can we help?

    If you are considering an SMSF, please feel free to give our SMSF Specialist Advisor, Cayle Petritsch, or Martin van der Saag a call to arrange a time to meet so that we can discuss your particular requirements and circumstances in more detail. Read more Superannuation articles.

    High earning individuals will have an option to opt-out of receiving certain superannuation guarantee amounts from 1 July 2018. Under the proposed legislation, employees earning over $263,157 with multiple employers will be allowed to receive additional cash from the second employer.

    This additional cash received in lieu of superannuation guarantee will prevent an inadvertent breach of the super contribution rules, which are taxed at penalty rates.

    The law will be enacted allowing the ATO to issue an employer with a shortfall exemption certificate. This can only occur when an employee would likely have excess concessional contributions.

    This new law, when enacted, may free up additional cash flow for high income earning individuals, as well as reduce overall paperwork for superannuation compliance.

    If call Martin van der Saag or our Superannuation Specialist Cayle Petritsch if you have any questions. Read more Superannuation articles.

    From 1 July 2017, superannuation fund members are subject to a $1.6 million transfer balance cap (TBC) which limits the tax exemption for assets funding superannuation pensions.

    The TBC encompasses a significant amount of monitoring for an individual.  This monitoring is to be facilitated by the Australian Taxation Office’s (ATO) event-based reporting framework.

    Event-based reporting is a significant shift in SMSF administration processes. Therefore, it is essential SMSF trustees understand the event-based reporting framework and get it right.

    Why events-based reporting?

    Event-based reporting is required for the ATO to track an individual’s transfer balance account across all their funds including public offer and defined benefit funds and administer the appropriate consequences if an individual exceeds their cap. It is important to let us know if you have any other superannuation funds other than your SMSF.

    An SMSF is only required to report if one of its members has an event that impacts their transfer balance account, such as the ones listed below.

    From 1 July 2018, timeframes for reporting are determined by the total superannuation balances of the SMSF’s members:

    • where all members of the SMSF have a total superannuation balance of less than $1 million, the SMSF can report this information at the same time as when its annual return is due.
    • SMSFs that have any members with a total superannuation balance of $1 million or more must report events affecting members’ transfer balances within 28 days after the end of the quarter in which the event occurs.

    What needs to be reported?

    An SMSF must report events that affect a member’s transfer balance account, including:

    • Income streams a member was receiving on 30 June 2017 that continued to be paid to them on or after 1 July 2017 and are in retirement phase.
    • New retirement phase income streams.
    • Some limited recourse borrowing arrangement payments.
    • Compliance with a commutation authority issued by the Commissioner.
    • Commutations of retirement phase income streams.

    All SMSFs that were paying a retirement phase income stream at 30 June 2017 need to complete and lodge a TBAR on or before 1 July 2018 to report the balance of each pension individually, for each member as at 30 June 2017.

    An SMSF is required to report earlier if a member has exceeded their transfer balance cap, regardless if it usually reports annually.

    Roll-over to an APRA fund

    If you are going to roll over a super benefit into an APRA-regulate fund and start an income stream you are encouraged to report the communication as soon as it occurs.

    As APRA-regulated funds have a monthly reporting regime, waiting to report the roll-over can result in a double-counting of the member’s income streams.

    How can we help?

    If you are concerned that your SMSF will be affected by the new pension reporting requirements please feel free to give Martin van der Saag or Cayle Petritsch a call on 02 9984 7774. Read more Superannuation articles.